VentureBeat

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Lithium Technologies, which builds and operates social networks for enterprises, has raised $12 million in venture capital today.

The company’s clients include Dell, AT&T, Sony PlayStation, Univision, and PayPal — all businesses with large user communities and heavy customer service and product support needs. Lithium’s community sites are designed to help these clients streamline the interaction with their customers and improve brand loyalty. To get an idea of how the sites function, take a look at the one Lithium designed for Dell. With features such as Dell forums where customers can engage with each other to answer support questions and share tips, the main point is to build brand loyalty in a two-way conversation with consumers.

The idea is to use best practices to stir up people like Jeff Stenski, a Dell customer who has voluntarily spent the equivalent of 141 days of his time over the years and posted more than 22,000 answers to technical support questions on Dell’s community web site. Stenski’s answers have been viewed more than a million times, saving Dell more than $1 million, according to Lithium. That prompted Forrester Research analysts Charlene Li and Josh Bernoff to call out Lithium in their social networking book, “Groundswell: Winning in a World Transformed by Social Technologies.”

A number of startups have moved to deliver similar social networking communities to the enterprise market. Marc Andreessen’s Ning social-networking platform can be used to build enterprise communities. Liveworld, Igloo, HiveLive and KickApps also promise companies that they can build thriving social networks. But Lithium has attempted to set itself apart by using game-like motivators such as leaderboards, rewards, reputations and profiles.

We mentioned the trend of using game-like features in non-game applications in our earlier story about Funware. In the Dell IdeaStorm voting, the most-frequent contributors can get “iSquared powers,” meaning they get ten times the voting power of other community members when it comes to selecting which of the IdeaStorm product ideas are the best.

“We’re managing sites for companies that collectively get a billion page views a month,” said chief executive Lyle Fong. “Our job is to get those one percent of users who are hardcore fans and turn them into the company’s biggest evangelists.”

Lyle Fong, by the way, is the brother of Dennis “Thresh” Fong, a professional video game player who won a Ferrari at age 20 when he was crowned the world’s best.

The boyish-looking Fong brothers of Los Altos are legendary in video games. Dennis dropped out of UC Berkeley to play video games for a living. He picked up honors as the world’s best “Doom” and “Quake” player. He was one of the first people to actually make video gaming a profession, winning big cash prizes and the Ferrari.

Dennis co-founded another company, GX Media, with Lyle. At first, they were selling gaming computers out of a dorm room. In 1997, they founded Gamers.com, a site that offered news and community forums for hardcore gamers, as well as game fan site FiringSquad.com, started with their other brother, Bryant. They raised $11 million in venture financing from CMGI in 1999 and lived the good life. Gamers.com even threw a party at the Playboy Mansion during an E3 show.

In 2001, Ziff-Davis bought Gamers.com and GX Media spun out Lithium Technologies under Lyle. Dennis went on to found Xfire, an instant-messenger service for gamers which was purchased by Viacom’s MTV for $102 million. Dennis is now head of the startup Raptr, a gamers social networking client.

Lithium is based in Emeryville, Calif. This second round of funding was led by Benchmark Capital. The cash will help the company expand its marketing and product development as it faces new kinds of competitors. The company previously raised a $9 million round from Shasta Ventures and Emergence Capital Partners in 2007.

Here’s the latest action:

Dell wants greener PCs (now if only their customers did too) — The computer maker says its laptops and desktops should consume 25 percent less energy by 2010. But the Wall Street Journal notes that Dell has an uphill battle in its effort to become the self-proclaimed “greenest IT company”, because many IT departments think environmentally-friendly computers are too expensive.

Atari releases exercise game system to compete with Nintendo’s — The new Wii Fit isn’t the only option for gamers who want to get in shape without leaving the comfort of their living rooms. Atari plans to release Family Trainer, a product for the Wii, this fall. It’s being billed as a simplified Wii Fit; players use an interactive floor mat for outdoor games like river rafting and log jumping.

Mozilla shares a few details about data collection project — As the company tries to expand beyond its Firefox web browser, one of its next projects is a service that could provide a fresh take on web analytics. Mozilla chief executive John Lilly writes that he project’s goal is to collect and share user data in a way that gives users control and protects their privacy, and to enable everyone to analyze and mash-up that data. That’s not a lot of information to go on, but it’ll be exciting to see what Mozilla comes up with.

Ask.com to buy Lexico — Apparently, the most popular query on search engine Ask.com is the word “dictionary”, so it kind of makes sense that IAC/Ask would purchase the Lexico Publishing Group, which owns Dictionary.com, Thesaurus.com and Reference.com. Ask says the deal will make it the ninth most visited property online, ahead of Facebook. Acquisition details haven’t been disclosed, but presumably the number is close to Answers.com’s $100 million offer for Lexico last year.

Google creates an encyclopedia for web developers — The site, called Doctype, will include articles on web security, best practices and more, as well as reference materials on HTML, DOM and CSS, and even some unused Google code that was developed for internal use. Taking a page from Wikipedia, Doctype can be edited by anyone with a Google account.

IBM develops technology to let solar cells stand the heat of more than 1,000 suns — That’s an important step, because cooling is a big concern with the photovoltaic cells used in solar panels. IBM’s stated performance is better than some companies like SolFocus and Greenvolts, but not as good as a recent upstart called Sunrgi.

Avast ye pirates! The Bush Administration is accusing China, Russia and seven other countries of failing to protect American producers of movies and other entertainment from piracy. The question comes to mind: why did it take so long for the U.S. to figure this out? Also included on the list are Argentina, Chile, India, Israel, Pakistan, Thailand and Venezuela. Somehow it seems like this conversation should have taken place, oh, maybe 10 years ago?

Don’t expect Wii price cuts: Nintendo’s CEO Satoru Iwata said the company has no plans to cut the price of its popular Wii video game console, which costs $249 in the U.S. Demand for the Wii has been so strong that the company has been able to keep it at the same price since its launch in the fall of 2006. The same goes for the Nintendo DS handheld, Iwata told Reuters. The company said earlier this week that said its operating profit more than doubled in the year ended March 31. It forecast a further 9 percent gain this year to 530 billion yen ($5.08 billion). Clearly, Nintendo is just as happy as Microsoft and Sony to milk gamers dry.

Sun swallows Montalvo: Sun Microsystems confirmed that it bought the assets of Montalvo Systems for an undisclosed price. The high-flying microprocessor design company had tried to develop low-power chips to go up against Intel, but it ran into delays finishing its chip and had to sell out for a fire-sale price. Peter Glaskowsky, former editor of the Microprocessor Report and an executive at Montalvo, mourned the end of Montalvo in a blog post. Sun declined to say how it will use the Montalvo assets. Now what is Sun going to try? It could use Montalvo to go to war with Intel, protect itself with patents, or get a good engineering team. Glakowsky, by the way, has interesting analysis of Apple’s $278 million purchase of PA Semi.

EA to release Spore creature creator June 17: Spore is the next big game coming from Electronic Arts’ game design master Will Wright. The Spore Creature Creator tool will allow gamers to start designing their own creatures ahead of the Sept. 17 release of the big game. Gamers will be able to show off their creations and EA will get a lot of free labor. That’s because it will use the creations as rival creatures inside Spore. Thus, when you play the real game starting in September, your character will have square off against other creatures created by all of the people who use the tool. It’s another brilliant move by Wright.

Fashion venture moves forward: Online fashion company Indochino has received an undisclosed investment from Burda Digital Ventures, the venture capital arm of German media company Hubert Burda Media. Indochino will use the financing to build up its operations, according to a release from the company. Visitors to the company’s Web site, Indochino.com, can order custom-tailored men’s suits for home delivery. Boris Wertz, a principal at W Media Ventures, previously invested in Indochino and introduced the company to Burda Digital Ventures, according to the release. Indochino has offices in Victoria, British Columbia, and Shanghai.

AT&T boots T-Mobile: Clearing the way for Apple’s iPhones and iPod Touch handhelds to be used in Starbucks, AT&T began replacing T-Mobile as the Wi-Fi service provider in the Starbucks coffee houses in San Antonio. AT&T will talk more about how it will replace T-Mobile in Starbucks stores in other markets.

Skype guys raising a new fund: Skype co-founders Niklas Zennström and Janus Friis, as well as former Skype veteran Geoffrey Prentice, are raising a new venture fund of as much as $450 million. GigaOm reports that they plan to raise a total of 300 million euros.

Dell says ignore XP end-of-life deadline: Dell said that it would keep selling Windows XP as long as customers want it, despite a deadline from Microsoft, which wants everybody to start buying new systems with Windows Vista. Microsoft has set June 30 as the deadline for selling XP to consumers.

Electronics counterfeiting has hit an epidemic level. At the IP Symposium in San Jose this week, the scope of the problem was laid bare. Surely, there have to be opportunities for start-ups in fighting this problem.

Here are some factoids from the panel which included Tom Valliere, a consultant at Design Chain Associates, Daryl Hatano, vice president of public policy of the Semiconductor Industry Association, and Debra Eggeman, general manager of the Independent Distributors of Electronics Association.

One of every 10 tech products sold is counterfeit, leading to an estimate of a direct loss over $100 billion a year. Direct losses include recalls, increased warranties, rework.

High-tech products account for four of the top ten border seizures, according to U.S. Customs.

Last year, the U.S. and European customs officers seized more than 360,000 fake computer chips in a joint operation. Under “Operation Infrastructure,” the fake goods seized carried more than 40 different trademarks.

A $2 fake part leads to losses of $20 if detected at the manufacturing board level. It costs $200 if detected in the market.

Among the recent warnings for fakes: counterfeit electric drills, circuit breakers, batteries.

China is a big problem because its intellectual property enforcement has historically been weak, but it’s not the only country where fake parts are discovered or made.

Big companies that have been hit: Dell, Hewlett-Packard, and Sony. Industries affected: computers, avionics, automotive, telecommunications.

The types of counterfeiting include reverse-engineered copies, reclaimed scrap, remarked or re-branded working parts, and “bonus lots,” which slip out the back door of a factory. It’s only getting worse with the rise of eBay and Internet trading.

Daryl Hatano, vice president of the Semiconductor Industry Association, said that 15 billion chips were imported into the U.S. in 2006. With such numbers, it isn’t easy to catch the fakes.

One chip company reported that 100 of its parts with distinct serial numbers were counterfeited in the last three years. Another reported that it had made only 200 chips with a particular date code; it found a broker selling more than 40,000 of those chips.

The U.S. and Canada have conducted 400 seizures of fake Cisco network hardware with an estimated value of $76 million at retail.

None of these factoids are new, but they should make the case that somebody ought to do something about it. Technology can supply some answers. Using radio-frequency identification chips (RFID) could introduce supply-chain tracking. Manufacturers can embed nanoparticles and micro-tags in their products as anti-theft and secret identication devices. But such tracing can lead to spooky privacy invasions. Call it security, anti-counterfeiting, or supply-chain management. It’s got to be fertile ground for start-ups.

Apple received more good news today in terms of its share of the U.S. PC market. Apple captures 6.6 percent of the market in the first quarter of 2008, according to market research firm Gartner (via AppleInsider). This marks a 32.5 percent increase from its 5.2 percent share in the first quarter of last year. In that time, Apple has passed fellow computer maker Toshiba.

Overall, U.S. PC shipments were up only three percent over this time last year. That slow growth can be attributed to the weakening economy and decreased spending. Yet Apple and number one PC maker Dell both had robust growth. Dell saw its market share grow 15.7 percent up to 31.4 percent overall in the U.S.

Outside of the U.S., Apple still failed to crack the top five list of PC manufacturers, meaning it is somewhere below Toshiba’s 4.3 percent market share. Foreign and enterprise markets are the two areas Apple has yet to conquer during its past few years of big growth. However, a recent test program by IBM to use Macs in the workplace may help change that trend (our coverage).

Also, if Microsoft keeps making videos such as the one below to promote its Windows Vista operating system, Apple’s market share may grow even quicker.

[photo: flickr/captain giona]

Dell just announced the planned acquisition of EqualLogic, a supplier of data storage for large companies, for about $1.4 billion in cash.

The deal is the largest ever cash purchase of a private venture backed technology company, according to data from VentureSource. See table below.

This could be painful for EMC. Dell it the largest distribution partner of Clariion, EMC’s product that competes with EqualLogic’s. “I’m sure [EMC Chief Executive] Joe Tucci woke up with headache,” said Greg Gretsch, managing partner at Sigma, an early investor at EqualLogic.

EqualLogic, based in Nashua, New Hampshire, is hot because it bet early on a new standard for storage systems called ISCSI, which allowed the building of so-called Storage Area Networks (SANs) on Ethernet. The technology, which makes storage Internet based and locally available, makes storage for large companies more efficient and less costly than alternative technologies.

EqualLogic is focused entirely on this market, while larger competitors EMC and Network Appliance have continued to serve older technologies, even if they’ve focused more aggressively on ISCSI of late.

This ends a long ride for EqualLogic, which almost accepted a $35 million offer in 2002, when the market turned downward and the outlook was bleak. Sigma’s Gretsch tells me that Sigma and CRV encouraged the company to slog on.

The company’s momentum developed in recent years, however, and in July it filed for an IPO. It was ready to proceed with the offering as of last week, but the company decided to postpone the IPO until tomorrow to see if Dell would make its offer — and it did.

EqualLogic opted for the purchase because of the risks inherent in being a public company. The investors were willing to take it public, but the management team decided the $1.4 billion in cash wasn’t such a bad thing. The company was profitable for the last year, and had $37 million in revenue for the most recent quarter. It signed up 500 customers last quarter, said Gretsch.

Sigma Partners and Charles River Ventures invested in EqualLogic in 2001, when the company was just a business plan and three people. So those firms did very well. Total invested was $50 million, which included money from Fairhaven Capital and Focus Ventures.

CRV owned 29.9 percent and Sigma owned 29 percent of the company, when it filed its IPO filing in July. Fairhaven had 16.1 percent and Focus Ventures had 9.5 percent.